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Abstract

This Article discusses the principles under Article 82 of the Treaty Establishing the European Community concerning anticompetitive or exclusionary abuses involving pricing issues. This Article is structured as follows. Part I outlines the basic economic thinking behind price discrimination and identifies the principal legal situations under Article 82 in which it arises. Discriminatory pricing should only be prohibited (and therefore needs to be justified) in a small number of situations. Parts II-III discuss the specific situations under Community competition law in which price discrimination and the legality of pricing practices may be relevant. Part II discusses rebate and discounting practices, including target (or sales growth) rebates, fidelity or loyalty rebates, and rebates in return for exclusivity. Part III discusses price discrimination that gives rise to distortions of competition between customers. This concerns Article 82(c), a provision that has some parallels with the Robinson-Patman Act under U.S. law. In practice, it will be rare that a profit-maximizing firm will have the ability or incentive to charge different prices to comparable customers to such an extent that competition between those customers will be significantly distorted. Part IV discusses predatory pricing. It is important that prices that remain above average variable cost should nearly always be treated as legal, since rivals will usually be able, and should be encouraged, to compete in that scenario. Community competition law should only treat pricing above average variable cost as unlawful where there is evidence of other abusive behavior linked to that low pricing, in other words a clear plan to eliminate a rival by using a range of illicit practices. Part V discusses a specific instance of predatory pricing--cross-subsidization. Cross-subsidy cases are in essence cases in which the abuse, if there is one, is predatory pricing. Finally, the Conclusion summarizes the author's comprehension of what the correct principles under Community competition law concerning pricing practices should be.